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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (100073)3/27/2000 1:44:00 PM
From: brushwud  Read Replies (1) of 1572366
 
Its my understanding, however, that it is not treated as a separate expense on the Profit and Loss Statement; but rather it reflects the cost of an item to be depreciated over its useful life and is shown on the Balance Sheet as a liability. The actual item and its cost is what is shown on the P and L. Isn't that correct?

When a company buys a machine, it reduces cash and increases equipment, both assets on the balance sheet. Then they expense the depreciation for the current fiscal period, reducing the value of the equipment asset, and keep doing so until the value of the asset is zero. Alternatively, if the total cost of the item were written off on the income statement, it would be mostly offset by an accrual for the remainder of its useful life.
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